Blockchain for Loyalty Reward Programs
Distributed ledger technology, also known as blockchain, has received a great deal of attention due to its capability of powering crypto-currencies such as Bitcoin. In fact, many are also looking into the technology’s ability to improve customer service, experience, engagement, including loyalty reward programs.
Loyalty reward programs are popping up in every corner of the retail space, and that’s because businesses understand the importance of retaining existing customers and increasing customer loyalty. However, not all loyalty programs are sailing at their full potential.
WHY?
In this article, we will explore further on how this powerful technology (blockchain) can help realize the full value of customer loyalty programs.
How Blockchain Could Transform The Customer Experience?
- Blockchain introduces cost-cutting efficiencies, including cutting out high customer acquisition costs for brands.
- Transaction costs related to the issuance and redemption of reward tokens are much lower on the blockchain since they do not require a third-party. Blockchain also significantly reduces system management costs, thanks to smart contracts that automise processes, all while reducing costs related to instances of error.
- On top of this, brands themselves benefit from having access to an ecosystem of already loyal customers, which again reduces acquisition costs. - Blockchain encourages increased customer engagement and points redemption.
- Throughout blockchain, loyalty points can be exchanged within the brand, with other brands, or for cryptocurrencies or fiat. Better still, the potential for loyalty points to rise in value and get the customer more attractive rewards creates excitement that was never before a part of the loyalty program experience.
- Thanks to an ecosystem connecting different programs, customers are also then driven to check their loyalty programs more frequently since the reward options are more varied. - Blockchain increases security and therefore encourages loyalty.
- All transactions recorded on the blockchain are cryptographically secured, meaning that participants of the network have their own private keys (akin to their own personal digital signature). Blockchain’s immutable and tamper-proof nature also means that every transaction is traceable, which eliminates the potential for fraud or other misuses of the system (which is, again, connected to costs). - Blockchain offers a one-stop shop for customers to collect and redeem points.
- Blockchain provides a frictionless system, whereby customers can conveniently store all of their collected points in a digital wallet and use the same to make transactions, therefore encouraging engagement.
- Blockchain also connects different owners of loyalty programs and makes the points they distribute inter-operable. Customers can also exchange their loyalty points with other users, which again increases their utility. - Blockchain offers real value outside of the brand context.
- With blockchain, tokens that brands give out are tied to other digital assets which renders them valuable in another sense: customers are no longer forced to spend their loyalty points with a specific brand, or even other brands within the ecosystem, as they can choose to sell their tokens for fiat and spend the money in the real world!
Overall, blockchain technology does offer a solution for the industry — as it provides a huge shot in the arm to loyalty programs and raise their performance to the next level.
Don’t forget to read our article on “Building Reefic Protocol — A Connected Loyalty Ecosystem” next to understand how building a connected loyalty ecosystem with the use blockchain technology can help.
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